17 Oct 2022 3 min read

How a ‘WhatsApp moment’ could transform the payments landscape

By Aude Martin

As a wave of change hits the digital payments world, we consider what recent history could tell us about the impact of disruptive technology on a long-established industry.


Technology constantly remakes the world around us. Sometimes changes are incremental, and sometimes they are transformative.

Cast your mind back to the late 2000s, and you may remember chip and pin credit and debit cards were being rolled out. Created in response to the security shortcomings of earlier magnetic stripe technology, EMV (standing for Europay,* Mastercard* and VISA,* the companies behind the system) added multiple layers of protection to combat the risk of card cloning.

EMV represented a major change in the digital payments industry – albeit an incremental change.

But in 2007, around the same time that EMV was becoming standard, two separate developments would herald truly transformative changes.

Transformation in action

The smartphone revolution paved the way for the always-on internet we now take for granted, and with it the convenience of paying for goods without going anywhere near a point-of-sale terminal.

At the time the iPhone was launched in 2007, the percentage of UK retail sales performed online stood at around 3%, compared with around 25% today1 – an acceleration facilitated in part by millions of people carrying the world’s biggest supermarket in their back pocket.

Meanwhile, the launch of M-Pesa in Kenya showed that even basic mobile functionally such as SMS messaging could be used to provide essential banking services without the need for branches.

Between 2008 and 2014, it’s estimated that the spread of mobile money services, spearheaded by M-Pesa, helped lift a million Kenyans out of poverty.2

A blockchain revolution

Fast forward to today, and we may be on the cusp of another transformational change in digital payments. While the developments above made the existing payments framework accessible regardless of proximity to payments hardware, the next wave of change could result in an entirely new payments architecture.

Blockchain – a digitally distributed ledger – has potential to disintermediate the payments industry by enabling buyers and sellers to transact directly, with technology taking the place of trusted intermediaries. While credit card transactions typically incur merchant fees of around 2-3%,3 blockchain-enabled payments could reduce this to a fraction of a percent.

Stablecoins, blockchain-enabled digital currencies designed to mirror the value of fiat equivalents, could also offer benefits beyond lower transaction fees. Although some stablecoins have failed to deliver the stability implied by their name as a result of inadequate collateralisation or flaws in algorithmic approaches to currency pegging, they nonetheless have significant potential utility.

Who pays the price of disruption?

One of the big questions raised by the disruptive technologies encompassed by blockchain is who will pay for the infrastructure given the likely loss of processing revenues. A useful analogy can be found in Meta Platforms’* $19 billion purchase of WhatsApp in 2014.

WhatsApp disrupted existing telecom revenue streams from voice calls and SMS, but its utility to users created value for Meta, which was able to monetise its user base through data collection and bolt-on services such as a payments system.

Similarly, although blockchain-enabled payment systems could lead to a loss of payment processing revenues, they could be leveraged as a platform for value-added services higher up the chain.

The eventual shape of tomorrow’s payments industry remains unknown. But history suggests technological developments that offer users lower costs and greater convenience will embed themselves in our everyday lives – often sooner than predicted.

Learn more about advances in digital payments

The above summarises some of the topics covered at our recent Global Thematics Forum, which was held in London. Below is the video of the session, which covers the topic in more depth as well as touching on the metaverse and the token economy.


*For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.

1. Source: https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j4mc/drsi

2. Source: UN; https://www.betterthancash.org/

3. Source: https://www.business.org/finance/payment-processing/average-credit-processing-fees/

Aude Martin

ETF Investment Specialist

Aude joined L&G ETF in July 2019 as a cross-asset ETF Investment Specialist. Prior to that, Aude worked as a delta one trader at Goldman Sachs and within the structured-products sales teams at HSBC and Credit Agricole CIB. As an investment specialist, she contributes towards the design of investment strategies and actively supports the ETF distribution and marketing efforts. She graduated from EDHEC Business School in 2016 with an MSc in Financial Markets.

Aude Martin